A Lending Institution Would Prefer That a Firm Have A__________

question 45

Multiple Choice

A lending institution would prefer that a firm have a__________ debt- equity ratio and a __________times interest earned ratio.

• A) lower; higher
• B) higher; lower
• C) lower; lower
• D) higher; higher

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Definitions:

Net Income

The final amount a company earns post all deductions, including expenses and taxes, from its revenue.

Gross Profit Method

An inventory estimating method that calculates cost of goods sold based on gross profit margin, used for interim financial statements or when inventory is destroyed.

Gross Margin Ratio

A financial metric that indicates the percentage of sales revenue remaining after deducting the cost of goods sold (COGS), used to assess a company's financial health.

Financial Statements

Reports that detail the financial performance of a company, typically including the balance sheet, income statement, and cash flow statement.